A MANILA commercial court has junked the petition for involuntary rehabilitation of Philippine Women’s University filed by 100-year-old Helen Benitez, citing “materially false” and “misleading” representation alongside findings that the school had been insolvent long before creditor STI Holdings came into the picture.
In a 14-page order dated Aug. 20 issued by presiding judge Rainelda Estacio-Montesa, the special commercial court under the Regional Trial Court of Manila said it was convinced that the allegedly creditor-initiated corporate rehabilitation had been executed “for the primary purpose of delaying the enforcement of the rights of creditor.”
The court added it required accuracy and integrity in the numbers to accomplish the objectives of the Financial Rehabilitation and Insolvency Act (FRIA) of 2010, quashing the statistics presented by Benitez.
Crucial in the determination of whether due course should be given to the matriarch’s petition, the court said, would be to look at the factual circumstances of insolvency. Citing the rehabilitation receiver’s report, the court said it was clear that way back 2000, PWU was already insolvent, referring to a situation where it did not have enough assets to cover the amount of liabilities.
This fact of long-running insolvency was not divulged in the petition that was filed, the court said, noting that the petition had stood on the sole ground that the foreclosure proceedings to be initiated by STI Holdings would render the debtor-corporation insolvent.
“There was no mention that the corporation was in financial distress even prior to the initiation of the foreclosure proceeding by STI,” the court said.
“Thus contrary to the audit findings, the court puts into big question if debtor-corporation was guilty of fraud or misrepresentation in its dealings with its creditors since year 2000 regarding its capacity to pay the obligations and loans it has taken out from several institutions,” it noted.
The court ruling said it was not a sound business practice for a distressed corporation, which knew itself to be insolvent and well aware of its financial state and its inability to pay, to still enter into transactions and venture into new loan obligations without laying down to its creditors the true state of its finances.
Still citing the receiver’s report, the court said that if PWU had not entered into different joint venture projects, it would have neither borrowed money from different financial institutions nor incurred P1 billion in expenses. Instead of incurring cumulative losses of P400 million, the court said PWU would have instead recognized an operating profit of P365 million in 2000 to 2013.
The court said the main causes of PWU’s insolvency included the acquisition of properties in Caliraya and Fairview, and another property from sister firm Unlad Resources Development Corp.; the assumption of mortgage payables of and the joint venture with Jardine Land Inc. and Sta. Lucia Realty and Development Corp., and the sale of a property to Mango Orchard Realty and Development Corp.
Likewise cited were “unauthorized” advances made by the company president, “considerable” impairment of advances and the loans to bank creditors. (STI assumed a loan from Banco de Oro).
“This court finds it odd for a school to enter into transactions involving realty,” the court said.